With no legal claim to their land, many Colombian peasants can't afford seeds, fertilizer or basic machinery.

LA MACARENA, Colombia — In this farm town once ruled by drug-running rebels, Mayor Eliecer Vargas wants to pave the dirt roads, install water pipes and build parks. He wants to convince people that the government is on their side.

But hardly anyone living in and around La Macarena holds legal title to their land. As a result, they pay no property taxes, rendering the town hall nearly bankrupt.

“We should be taking in about 200 million pesos [about $100,000] per year,” Vargas said. “But there’s no way to collect.”

Here in the southern plains of Colombia where coca — the raw material for cocaine — has long been the main cash crop, the lack of land titles is more than just a tax concern: It’s a national security issue.

That’s because Colombia’s farm economy runs on credit. Coca growers trying to switch from drugs to legal crops can’t buy seeds, fertilizer or machinery because they lack the land titles required to secure bank loans.

Many peasants have lived on their land for decades yet have the legal status of squatters. This legal limbo makes it easier for drug traffickers — who are quick to provide start-up money — to convince them to grow coca and for guerrillas to recruit their sons and daughters into the war.

“People here are in a state of transition and are only now beginning to have confidence in the state,” said Eunice Ramirez, the government’s human rights advocate in La Macarena, a town that was formally turned over to the guerrillas during three years of peace talks that ended in failure in 2002. “But these bandits are still very influential.”

Part of the problem is government bureaucracy.

Whether registering a business, signing up employees for social security or selling a car, doing things the legal way in Colombia and elsewhere in Latin America, can turn into expensive, nightmarish, 50-step operations.

Peruvian economist Hernando de Soto has pointed out that a well-established system of property rights helped turn the United States and other Western nations into prosperous capitalist societies. In developing countries, he says, the great masses of poor people actually sit atop billions of dollars in assets but are unable to leverage this wealth because of their informal status.

“The existing legal system in the Third World conspires against them,” De Soto said in a recent PBS documentary.

Not only do land titles help raise property values, but they formalize the social contract between the state and its citizens — no small thing in areas like La Macarena where guerrillas and drug traffickers have long held sway.